Updated about 7 years ago on . Most recent reply
Mortgage and Bankruptcy
Can someone tell me what happens when a mortgagor files bankruptcy before a foreclosure auction takes place. Is the mortgage wiped out? What generally happens to the property securing the loan?
Thank you
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#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
No. Assuming the borrower actually completes the BK, the result is that the borrower no longer has a Personal obligation for the actual debt....the mortgage against the property is not affected in any way.
Typically, the bank will get a Relief from the Stay of foreclosure in the beginning, and proceed with the foreclosure/auction while and if the borrower is casually completing the BK.
We’re talking about a first mtg in a Chapter 7......in a 13 a second mtg could possibly be stripped from the property.